The government handed down a budget earlier this week specifically designed to pull Australia out of the Covid19-led recession.

According to Treasurer Josh Frydenberg.

“The global economic environment remains uncertain with the impact of this crisis to be felt for many years to come.
In Australia, the economy is forecast to fall by 3.75 per cent this calendar year and unemployment to peak at 8 per cent in the December quarter.

This is a heavy burden, but a necessary one to responsibly deal with the greatest challenge of our time”

From tax cuts to incentives for jobs, business grants and health packages, the government’s 2020 budget is aimed squarely at turbo-charging the economic growth forecast for 2021.

The Guardian has provided a summary of all the highlights of the government budget announcement with a quick video highlighting the net debt impact to reach just under $1 trillion.

Federal Budget 2020 - The Guardian

For Small Business

1. Extension of Instant Asset Write-off

Businesses with a turnover of less than $5bn will be able to deduct the full cost of capital assets purchased and installed by 30 June 2022.

  • “Full expensing” in the year of first use will apply to new depreciable assets and the cost of improvements to existing eligible assets.
  • For small- and medium-sized businesses (with aggregated annual turnover of less than $50 million), full expensing also applies to second-hand assets.

2. Loss Carry-Back

Companies that have paid tax in the past, but that are now in a tax loss position, will be permitted to carry their loss back to those past years to obtain a refund of some of the tax they previously paid.

This measure will enable many distressed companies to claim back the taxes they paid on their pre-COVID-19 profits against losses they are incurring during the current downturn.

Companies that do not elect to carry back losses under this measure, can still carry losses forward as normal.

For Individuals

1. Tax Cuts

More than 11 million Australians will receive tax cuts. Reductions in individual tax rate thresholds will apply for the 2020-21 income year.

  • the top threshold of the 19% personal income tax bracket will be increased from $37,000 to $45,000
  • the top threshold of the 32.5% personal income tax bracket will be increased from $90,000 to $120,000.

This brings forward the changes previously legislated to commence from the 2022-23 income year and will result in annual tax savings of $1,080 for individuals with a taxable income of $50,000; a savings of $1,530 for those earning $100,000 and $2,430 if earning $150,000.

2. Superannuation

Super funds will now follow the individual when they change employers to prevent the creation of unintended multiple superannuation account
A new online YourSuper comparison tool will help performance comparison and help hold funds accountable for performance.

3. Jobs

Businesses to be paid up to $200 per week to hire young Australians in a bid to reverse an increase in youth unemployment.
Expanded training subsidies with the government pledging to cover half the wages of 100,000 new apprenticeships and traineeships

4. Health

23,000 new packages for older Australians waiting to receive at home care, at a cost of $1.6bn.
$798.8m for the National Disability Insurance Agency and NDIS Quality and Safeguards Commission

Click on the image below to download a handy infographic summarising the budget initiatives. 

The prime minister has then reportedly gone on to say that all the budget measures – $17.8bn worth of income tax cuts, business investment incentives that cost the budget over $26bn, a hiring credit that cost $4bn – would all go ahead regardless of whether or not the assumptions, which inform the budget bottomline, ultimately came to pass.

Whilst Labor has declared that the budget is a missed opportunity, they are highly likely to to support the business incentives, even though there is concern about the substantial cost of the concessions.

See the PM’s declaration about the budget measures going ahead here.

A major caveat on the budget lies in the future of a coronavirus vaccine.

In effect, the government says any significant economic recovery hinges on the successful development of a vaccine from any of the ongoing clinical trials.

Current forward estimates have Australia exiting a recession based on current Federal Budget spending initiatives, by 2021/22 financial year.

See 9 News’ graphic representation of all the spending initiatives.

If you have any questions with regard to how this budget might impact your business and individual tax position, feel free to contact us here:

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